The Urethane Blog
July 2, 2024
FTC preparing lawsuit to block Tempur Sealy’s $4B acquisition of Mattress Firm
Jul. 02, 2024 7:51 AM ETTempur Sealy International, Inc. (TPX) StockBy: Joshua Fineman, SA News Editor
The Federal Trade Commission is poised to sue to block mattress maker Tempur Sealy’s (NYSE:TPX) $4 billion planned purchase of retailer Mattress Firm. Tempur Sealy ticked lower by 0.5% in premarket trading.
The regulator is concerned that combining the largest manufacturer and retailer would lead to higher prices and that Tempur Sealy (TPX) may discriminate against rival suppliers, according to a Politico Pro report late Monday, which cited three people familiar with the matter.
A lawsuit could be filed as soon as Tuesday, according to the report.
The Politico Pro piece comes after CTFN reported last Tuesday that the companies met with the FTC last week in a last effort to try to convince the regulator to not block the combination.
CTFN also reported on Thursday that the Tempur Sealy/Mattress Firm deal was expected to be the subject of closed door meeting at the FTC on Monday. Tempur Sealy (TPX), which agreed to buy Mattress Firm in a $4 billion deal in May 2023, had agreed to sell off some of its retail stores to try to appease the FTC, according to the earlier CTFN item.
July 1, 2024
June 27, 2024
With Rates Dropping, Operating Costs For Truckers Hit Record High In 2023
by Tyler Durden
Thursday, Jun 27, 2024 – 09:55 PM
By David Hollis of TruckersNews
Operating expenses for trucking companies increased in 2023, according to the results of a new study released today.
The American Transportation Research Institute’s 2024 Analysis of the Operational Costs of Trucking found the overall marginal costs of operating a truck hit $2.270 per mile in 2023, a new record high. While the increase was only 0.8 percent over the previous year, when surcharge-protected fuel costs are excluded, marginal costs rose 6.6 percent to $1.716 per mile, according to the study.
ATRI’s annual report analyzes line-item costs, operating efficiencies, and revenue benchmarks by fleet sector and size.
Overall, 2023 expenses rose moderately across most categories, with average costs across line-items increasing at less than half the rates experienced during 2021 and 2022, according to the study. It found:
- Truck and trailer payments grew by 8.8 percent to $0.360 per mile
- Driver wages grew by 7.6 percent to $0.779 per mile
- Repair and maintenance costs grew by 3.1 percent to $0.202 per mile
- Insurance premiums grew by 12.5 percent to $0.099 per mile after two years of negligible change
ATRI said the soft 2023 freight market — which continues in 2024 — posed many challenges for operational efficiency. Deadhead mileage rose to an average of 16.3 percent for all non-tank operations, and driver turnover rose by five percentage points in the truckload sector.
These pressures combined with low freight rates strained profitability across the industry, said ATRI in a statement announcing the release of its study.
Average operating margins were 6 percent or lower in all fleet sizes and sectors other than LTL. The truckload and specialized sectors experienced drops in per-mile or per-truck revenue, and most saw “other costs” – expenses outside of the core marginal line-items – increase as a share of total revenue.
https://www.zerohedge.com/economics/rates-dropping-operating-costs-truckers-hit-record-high-2023
June 24, 2024
Adnoc Said Prepared to Boost Covestro Bid to Nearly €12 Billion
Eyk Henning and Dinesh Nair, Bloomberg News
Officials arrive for a tour of the Ruwais refinery and petrochemical complex, operated by Abu Dhabi National Oil Co. (ADNOC), in Al Ruwais, United Arab Emirates, on Monday, May 14, 2018. Adnoc is seeking to create world’s largest integrated refinery and petrochemical complex at Ruwais. Photographer: Christophe Viseux/Bloomberg , Bloomberg
(Bloomberg) — Covestro AG said it’s entering concrete negotiations with suitor Abu Dhabi National Oil Co. on a potential takeover that could value the German chemical company at about €11.7 billion ($12.5 billion).
The Middle Eastern energy giant indicated to Covestro it’s considering a potential offer of €62 per share, subject to confirmatory due diligence, according to a statement Monday that confirmed an earlier Bloomberg News report. The German company said that level is the “starting point” for the negotiations over an investment agreement.
Covestro agreed to exchange information with Adnoc to help it firm up the bid. Adnoc said in a separate statement that the potential bid of €62 per share is its final offer, indicating it won’t be raising any further after already bumping several times over the course of a year from its first proposal of €55 per share.
A final deal would represent Adnoc’s biggest-ever acquisition. Backed by tens of billions of dollars of oil money, the UAE state company has been scouring the world for deals. Chemicals is a big part of that push as the company sees demand for products that are used to make goods such as plastics continuing to rise over the coming decades even as the energy transition is likely to slow oil demand.
Arne Rautenberg, a portfolio manager at Union Investment who owns Covestro shares, said the potential offer of €62 per share is a “reasonable basis” for entering into concrete negotiations.
“From an investor’s perspective, however, there is still room for improvement,” Rautenberg said. “Covestro is in a better position in negotiations today than it was a year ago. The chemical industry is recovering globally, and so are the profit prospects for manufacturers.”
Bloomberg News reported earlier Monday that Covestro’s supervisory board was discussing its next move after Adnoc sent a formal letter of its intention to sweeten its bid to €62 per share, from €60 apiece, if in-depth due diligence goes well.
Shares of Covestro jumped as much as 7.3% in German trading Monday, hitting the highest intraday level since February 2022. They were up 6% to €54.34 at 3:35 p.m. in Frankfurt.
In recent days, Adnoc received the green light from senior government officials to boost its offer under the condition that it successfully conducts in-depth due diligence, people with knowledge of the matter said.
“We welcome Covestro AG’s decision to commence confirmatory due diligence on the basis of our final offer,” Adnoc said in an emailed statement. “Adnoc is a value-adding, responsible, long-term partner and growth-orientated investor, and we look forward to jointly working with Covestro to swiftly progress due diligence for this important transaction.”
Willingness to Raise
Adnoc had already verbally indicated its willingness to increase its latest bid of €60 per share, worth about €11.3 billion in total, Bloomberg News reported earlier this month. However, Covestro executives were seeking more formal, written assurances from the potential buyer before moving forward, some of the people said.
Covestro said Monday it intends to proceed with the deal negotiations in a timely manner.
“The discussions so far have shown that Covestro and Adnoc can generally reach a common understanding regarding core aspects of a possible transaction including support for Covestro’s further growth strategy,” Covestro said in the statement.
The Leverkusen-based plastics company and Adnoc have been in talks for a year now over a potential transaction that would be the largest acquisition of a European firm by a Middle Eastern buyer. Adnoc first informed Covestro’s management about its takeover interest mid-last year and subsequently improved its initial, non-binding offer of €55 per share to €57 and then to €60 per share, Bloomberg News has reported.
Adnoc has been pushing ahead with other deals in recent weeks. Last month it picked up stakes in gas projects in the US and Mozambique, and has ambitions to expand in chemicals and trading operations globally. It’s also increasing oil production capacity at home.
Other bids to buy Brazilian chemical company Braskem SA collapsed while plans to take out an Israeli company were suspended followed the war in the Gaza Strip. Talks with Austria’s OMV AG about combining their units to create a €30 billion giant has been on hold ahead of Austrian elections later this year. These had given rise to speculation that Adnoc’s dealmaking had lost momentum.
Klaus Froehlich, the former Morgan Stanley banker spearheading most of Adnoc’s international expansion plans, defended Adnoc’s position in an interview last month, saying the company was still pushing ahead with deals.
He added that said Covestro was “a great platform with a fantastic management team,” saying his company is a “firm believer in the future of the chemicals industry.”
–With assistance from Anthony Di Paola, Vinicy Chan and Crystal Tse.
June 23, 2024
High housing costs drive housing crisis
By Dakota Smith
June 20, 2024 | 9:38 am CDT
CAMBRIDGE, MA — Homeowners and renters across the US are facing high housing costs, according to ‘The State of the Nation’s Housing 2024,’ a new report from the Harvard Joint Center for Housing Studies. High home prices and interest rates price out millions of potential homebuyers, while the number of renters with cost burdens has reached an all-time high. However, a surge in new multifamily rental units is slowing rent growth, and increasing single-family construction is starting to lift for-sale inventories.
Rising housing costs
Homeowners and renters are both struggling with high prices in 2024. Home prices reached a new high in early 2024 despite elevated interest rates, rising at an annual rate of 6.4 percent in February. The US home price index is now 47 percent higher than in early 2020, pushing the median sales price to about five times the median household income. Meanwhile, although rent growth slowed to 0.2 percent year over year in early 2024, rents are still up 26 percent nationwide since early 2020 and rising in three out of every five markets.
Homeownership out of reach
After a brief dip in early 2024, interest rates on the 30-year mortgage rose to over 7.0 percent by mid-April, pushing mortgage costs to 30-year highs for a median-priced home. As a result, first-time homebuying dropped and the US homeownership rate inched up just 0.1 percentage points in 2023 to 65.9 percent, the smallest increase since 2016.
Cost burdens hit record highs
In the face of rising housing costs, burden rates are also increasing. Half of all renter households—22.4 million in total—spent more than 30 percent of their income on housing and utilities at last measure in 2022, up 2 million since 2019 and the highest number on record. “Rents have been rising faster than incomes for decades,” says Alexander Hermann, a Senior Research Associate at the Center. “However, the pandemic-era rent surge produced an unprecedented affordability crisis that continues.”
The number of cost-burdened homeowners also grew by 3 million to 19.7 million between 2019 and 2022, with most of the increase among households with incomes under $30,000. Nearly one in four (23.2 percent) homeowner households are now stretched worryingly thin, including 27.4 percent of homeowners age 65 and over. Adding to the financial pressures, insurance premiums grew an average of 21 percent between May 2022 and May 2023, and property taxes are on the rise, further increasing the cost of homeownership.
Low for-sale inventories lead homebuyers toward new homes
Existing homes for sale remain in short supply. Just 1.1 million homes were available for purchase in March 2024, down 34 percent from March 2019. This is just 3.2 months of supply, even with the current reduced sales rate. Annual home sales dropped 19 percent in 2023, nearly a 30-year low. The shortage of homes for sale is due largely to the “lock-in” effect, where current homeowners with below-market interest rates are disincentivized to move. With few existing homes for sale, aspiring homebuyers are turning to new construction. New home sales increased by 4 percent in 2023, constituting 15 percent of all single-family home sales compared to 12 percent just two years earlier. However, the construction of smaller, lower-cost, entry-level housing is still hampered by restrictive zoning and regulatory policies, skilled labor shortages, financing limitations, and other challenges that increase costs and reduce the amount of affordable development.
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